Ukraine minimizes purchases of Russian gas

The government and NAK Naftogaz Ukraine have accomplished the task set by President Viktor Yanukovych to minimize purchases of expensive fuel from Russian OAO Gazprom.

According to Deputy Prime Minister Yuriy Boyko, the dependence of the country on Gazprom has been considerably reduced: in 2013 under the contract with the company, Ukraine will have purchased only 11 billion cubic meters instead of 40 billion cubic meters, as was the case three years ago.

This was possible because of timely actions taken by Ukraine's government aimed at reducing consumption of expensive Russian gas in order to save state foreign exchange reserves. According to Prime Minister Mykola Azarov, the gas contract that was signed back in 2009, Ukraine overpaid to Russia almost 20 billion USD. To avoid these costs, the government has constantly insisted on reviewing existing gas agreements between NAK Naftogaz of Ukraine and OAO Gazprom

The diversification of gas supplies to the Ukrainian market is underway. This is largely due to the fact that the gas prices of Russian OAO Gazprom for Ukraine are significantly higher than for most European countries, although Ukraine is one of the largest consumers of Russian gas, one of the direct neighbors, and buys large amounts of gas in spring and summer. All this leads to the situation where it is more advantageous for Ukraine to buy gas in Europe than in Russia.

Ukrainian authorities want to develop mutually beneficial and equal partnership with OAO Gazprom. Despite the controversies that arise between Ukraine and Russia in the gas sector, Azarov says he is convinced that in the future the country will be able to recover a mutually beneficial partnership in all sectors of the economy.

Government experts say Ukraine faces the important tasks of providing alternative sources of gas supply to the domestic market and increasing its domestic production. Ukraine will be able to ensure its energy security provided it rids the dictatorship of the monopoly gas supplier.

The leading American consulting company IHS CERA has completed a review of the Ukrainian gas potential. The study was commissioned by the Ukrainian Government in 2012. It concluded that in 2015, production of gas in Ukraine would increase due to significant investments from domestic and foreign investors, as well as through the use of modern technology. This will lead to an increase in domestic gas production by about 14 billion cubic meters annually in 2025 and 26 billion cubic meters in 2035.

Ukraine currently produces about 20 billion cubic meters of natural gas annually. According to the forecasts of the Ministry of Energy and Mines, by 2017 Ukraine will be able to increase its gas production by 34.6%, up to 27 billion cubic meters annually.